Professional development of Iran’s capital market on the basis of financial engineering approach and its impact on the quality of accounting and auditing

Document Type : Original Article

Authors
F Rahnamay Roodposht 1
Mahdi Jamali 2
1 Department of Financial Management, Science and Research Branch, Islamic Azad University, Tehran, Iran
2 Graduated DBA "Doctorate of Business Administration" in Financial Engineering & Risk Management (Corresponding Author)
Abstract
The quality of accounting and auditing services, in any country depends on some factors many of which are deep-rooted in demand of outputs of the accounting and auditing system of the country. Since the quality of accounting and auditing is an important variable which is of high prominence to potential and real investors in the capital markets (in addition to information of financial reports), a significant part of abovementioned demand is to appear in the capital markets of the country. So, it makes sense to suppose that the Occupational development of the capital market of a country will improve the quality of accounting and auditing in that country. In other words, it is often supposed that Occupational development of the capital market can be considered as an important environmental stimulus to increase the quality of accounting and auditing of countries.
In this research, we studied the effect of Occupational development of Iran capital market on the quality of accounting and auditing, through data gathered from 125 listed companies from the years 1380 to 1390. To this end, the prevailing indices for measuring the quality of accounting and auditing at two different points of time, prior to Occupational development of Iran capital market and after that, have been evaluated so that the hypothesis for existing demand for financial reporting and qualified auditing on the one hand, and being stimulus of Occupational development of the capital market into the improvement of quality of accounting and auditing on the other hand could be examined. Multi-variables regression, logistic regression and pair sample T-test have been used to test the research hypotheses.
Based on the findings, the relevance of the accounting information and conservatism of financial reporting has increased and profit management has reduced after Occupational development of Iran capital market. Thus, the quality of accounting has improved after Occupational development of Iran capital market. On the other hand, the quality of accruals, as a parameter in quality of auditing, has increased after Occupational development of the capital market; however, since the volume of annual adjustments, as another important parameter in quality of auditing, has not changed significantly compared with the period before Occupational development of the capital market, we cannot claim that the quality of auditing has improved after Occupational development of the capital market.
Keywords
Occupational development of the capital market
Financial Reporting
quality of accounting
quality of auditing
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